ADR = Arbitration Done Right?

ADR = Arbitration Done Right?

14 HEALTH LAWYERS NEWS
MEMBER Forum MEMBER Forum
D
espite the fact that an
increasing number of
matters are negotiated
through mediation, arbitration
remains the process of choice for
many commercial and contract
disputes, particularly in healthcare
disputes. Given the popularity of
arbitration, one is reasonably safe
in placing litigators into one of two
categories: those who have arbi-
trated, and those who will. Either
category of advocate (or their
client) might benefit from a quick
review of ADR or, in this case, Arbi-
tration Done Right.
Arbitration: Litigation for
Dummies?
Some law firms may use the arbitra -
tion hearing as a training ground
for new associates, the thought
being that a new litigator has
less risk of harming the client in
a process that is private and less
formal than a public trial. Even
though most new advocates rise
to the occasion, the premise that
arbitration may be less risky for
the client is tenuous at best: not
only does an arbitrator have more
latitude than a judge; there is no
arbitration “court of appeals.” The
grounds for setting aside an arbitra-
tor’s award are few,
1
and courts are
reluctant to compromise an arbitra-
tor’s discretion.
2
What does this
mean for the litigator? No formal
mechanism for appeal provides
little, if any, ability to correct
mistakes made in arbitration.
Deal or No Deal?
Because the law of arbitration
confers such authority upon the
arbitrator, arbitral jurisdiction
must be a product of the parties’
agreement. Arbitration is created,
governed, and ultimately, judged
by the language contained in the
underlying agreement to arbitrate.
This has profound implications for
the advocate.
An agreement to arbitrate within a
contract will probably exist even if
the contract itself doesn’t survive.
Courts effectively treat the agree-
ment to arbitrate as a separate
contract “within a contract” that
will survive an attack that its host
may not.
3
The counterintuitive
result: an arbitrator may decide the
fate of a contract, the arbitrator’s
jurisdiction, and the scope of the
arbitration even when the contract
containing the arbitration clause
fails.
Arbitration as Threat
The threat of arbitration, like the
threat of litigation, is sometimes
just that. The fact that many
matters settle shortly after their
initiation may confirm many arbi -
trators’ suspicion that the filing
party is often simply trying to get
the other side to take its complaint
seriously. However, the filing of
arbitration merely as an attempt
to gain leverage over the opposing
side in the hopes of moving them
toward settlement is much like
raising the stakes in a poker game
when dealt a weak hand. As with
poker, bluffs are often called, and
it is necessary that, once a matter
is filed, both sides are prepared to
move forward with the arbitration.
This is made more important by
the fact that most arbitrators are
trained to move matters to a final
award promptly and diligently.
Who Will Decide?
In selecting an arbitrator, it is of
the utmost importance that one
makes the proper inquiries as to
a potential panelist’s impartiality
and independence. It is equally
important that, once one party
has initiated a proceeding, the
other party immediately review its
right to participate in the selection
process. This assures that the deci-
sion maker will be more acceptable
to the parties. Where one party
declines to exercise its rights in the
nomination process, an arbitrator
may be appointed solely on the
basis of the other party’s prefer-
ence. In the event that an arbitrator
is not appointed in the allotted
time, the court will appoint one.
4
This remains true even when the
parties disagree as to the validity of
the arbitration agreement. Simply
put, unless there is a court order
stopping the arbitration process,
once one party initiates the selec-
tion of an arbitrator, it is in the
other party’s best interest to
follow suit.
ADR = Arbitration Done Right?
Jerry P. Roscoe, JAMS, The Resolution Experts, Washington, DC
Maya Ganguly, Law Student, University of Wisconsin, Madison, WI15 FEBRUARY 2009
May I Ask?
Although ex parte contact with an
arbitrator or a potential arbitrator
is to be initiated with great care,
advocates need not totally relin-
quish control over the arbitrator
selection process. I recommend
the acronym “I PROSAIC” as a tool
that reminds one of the areas of
inquiry that courts generally have
found permissible:
I Is the arbitrator Independent?
__________________________
P Does the arbitrator have Prior
knowledge of the dispute?
__________________________
R Does the arbitrator have
Relationships with the parties,
counsel, or witnesses?
__________________________
O Are there Other applicable
areas of permissible inquiry
or required reporting (as in
California)?
__________________________
S Is this arbitrator Suitable?
__________________________
A Will this arbitrator be Available
throughout the process?
__________________________
I Can this arbitrator be
Impartial?
__________________________
C Is this arbitrator Competent to
judge this dispute?
Things Not to Be Taken for
Granite
As the Geology professor testi-
fied: “You can’t take discovery
for granite.” A bad joke, perhaps,
but a good lesson. While parties
generally assume that arbitration
will provide an opportunity for
interrogatories, depositions, and
requests for admissions, few advo-
cates appreciate that the Federal
Arbitration Act (FAA) does not
provide for discovery.
5
In agreeing
to arbitrate, litigators seem to
assume that typical discovery will
be part of the process. Be fore-
warned: if the underlying agree-
ment to arbitrate does not provide
for discovery, there is no guarantee
of any discovery whatsoever!
How may one party ensure that
some form of discovery will exist
in arbitration? Write them into the
arbitration agreement. True, it is
nearly impossible to foresee every
question that will arise in discovery;
however, a general guideline for
discovery procedures will help both
the appointed arbitrators and the
attorneys establish the existence
and scope of a discovery process.
Keep in mind, that while the FAA
does grant arbitrators the authority
to issue subpoenas,
6
it does not
grant arbitrators the authority to
issue subpoenas to third parties
for the purpose of discovery and
the circuits are split as to whether
arbitrators have this authority.
7
Particular attention is required
when discovery is sought from third
parties that reside beyond an arbi-
tration proceeding’s geographic
jurisdiction.
Damages, Is It About Splitting
the Baby?
There is a misconception that in
arbitration, the goal for an arbi-
trator is to divide the damages
between the parties, so that no one
walks away without receiving some-
thing for their time. The reality
is that arbitrators do not aim to
please all parties with the outcome,
nor should they. What arbitrators
are trained to do is craft an award
whose reasoning is impeccable,
such that even the losing party is
able to appreciate the methodology
by which the decision maker made
their findings and rulings.
Generally, arbitrators have broad
authority in crafting remedies.
Unlike judges, they are not
restricted to the remedies avail-
able in a court of law. So long as
the arbitration agreement does not
specifically prohibit them,
8
arbitra-
tors can issue punitive damages,
award injunctive relief, assess
attorney fees, or impose fees upon
a losing party. Generally, the court
is unlikely to vacate the awards.
The Rules of the Game
Even more than the selection of an
independent and neutral arbi-
trator, the selection of the rules
under which are arbitration takes
place will impact the manner in
which the arbitration proceeds
and perhaps even the outcome
of the arbitration. As previously
discussed, the arbitration agree-
ment and the procedural rules will
affect the discovery process and
the awards issued. More impor-
tantly, they will also determine the
functioning of the arbitration by
controlling not only discovery, but
also the issuance of subpoenas, the
nature and extent of deadlines,
objections, allocation of time,
requirements of pleadings and
briefs, permissibility of dispositive
motions, and exchange of evidence.
Many an advocate has made it part
way through their presentation
only to find that the rules they were
operating under did not guarantee
a desired extension of time.16 HEALTH LAWYERS NEWS
MEMBER Forum
Objections: Be Careful What
You Ask for
Although authors and arbitra-
tors alike agree that virtually all
evidence is admissible in a process
that must provide a “full and fair
hearing” that disposes of “all the
issues that are the subject of the
parties’ agreement,” litigators are
loathe to let in evidence that is
subject to objection. It is as if their
client will suspect a lack of will
or, worse yet, competence, if they
do not see their advocate fighting
tooth and nail to prevent their
opponent’s evidence from coming
in. Over the past several years,
arbitrations have become more like
litigation, and increased number
of evidentiary battles continues to
contribute to that trend.
Be careful what you ask for though,
as you may win the battle, but lose
the war. An arbitrator who sustains
too many objections may open the
award to attack on the grounds that
the exclusion of too much evidence
prevented a full and complete
hearing of the matter. The truth
is, no professional would last in
their career as an arbitrator if they
were not competent to weigh the
relevance and weight of evidence.
They most likely would not have
been selected in the first place. So
why not just let the less-offensive
evidence in without objection? The
arbitrator and the other side will
appreciate your confidence in the
process, it will be less disruptive
(and thus, more efficient, which
equals less costly) and, most impor-
tantly, will eliminate a very popular
avenue to successful challenge of
the award.
That’s a Wrap
Because healthcare disputes exist
in the context of a rapidly changing
environment, rapid, complete and
final resolution of disputes is often
required. To meet those needs,
arbitration will remain an impor-
tant form of dispute resolution.
Rather than be treated as a simpler
form of litigation, however, arbi-
tration needs to be respected for
what it is, a unique form of resolu-
tion with its own rules. By under-
standing the importance of the
arbitration agreement, the rules
of the arbitration, the process for
selection of an arbitrator, and the
legal nuance, a litigator can master
arbitration.
Jerry P. Roscoe is
an arbitrator and
mediator who has
resolved healthcare
disputes nation-
wide for more than
20 years. Mr.
Roscoe also serves
as the arbitration
and mediation trainer for the AHLA
Dispute Resolution Service. He is avail-
able at Jroscoe@jamsadr.com.
Maya Ganguly
is a third-year
law student at
the University of
Wisconsin, where
she serves as coach
to the International
Commercial Arbitra-
tion Team and Senior Managing Editor
of the Wisconsin International Law
Journal. In 2008, she competed in the
Willem C. Vis International Commer-
cial Arbitration Moot in Vienna, where
her team was a quarter-finalist.
____________________________
1 See The Federal Arbitration Act, 9 U.S.C.
§ 10, (states the grounds for vacating an
arbitration award in cases of corruption,
fraud, partiality, or undue means).
2 See Aramark Facility Serv. v. Service Employees
Int’l Union, Local 1877 AFL CIO, No.
06-56662, (9th Cir. June 16, 2008) (court
refused to vacate arbitration award on
public policy grounds), and Employees Ass’n
v. Bonita Unified Sch. Dist ., 77 Cal. Rptr. 3d
486, (Cal. Ct. App. 2008) (appeals court
refused to vacate arbitration award on
grounds outside of the Federal Arbitra-
tion Act).
3 See Prima Paint Corp. v. Flood & Conklin
Manufacturing Co., 388 U.S. 395, 402-06
(1967) (discussing that an arbitration
agreement in a contract can be severed
from the contract, allowing the arbitra-
tion agreement to stand even when the
contract does not.)
4 The Federal Arbitration Act, 9 U.S.C. § 5.
5 See The Federal Arbitration Act, 9 U.S.C. §
1-14, (at no point is discovery discussed.)
6 The Federal Arbitration Act, 9 U.S.C. § 7.
7 See Hay Group, Inc. v. EBS Acquisition Corp.,
360 F.3d 404, 406 (3d Cir. 2004) (in
this opinion by then Circuit Judge Alito,
the Third Circuit found that the FAA
does not grant arbitrators the authority
to subpoena witness for third party
discovery); compare with Security Life Ins. Co.
v. Duncansen & Holt, Inc., 228 F.3d 865,
870-71 (8th Cir. 2000) (Eighth Circuit
found that the power to subpoena a third
party for discovery is implicit).
8 When the arbitration agreement specifi -
cally limits a particular remedy, the court
will vacate the award, see, e.g., O’Flaherty
v. Belgum, 9 Cal. Rptr. 3d 286, (Cal. Ct.
App. 2004), compare with Ajida Techs. v.
Roos Instruments, 104 Cal. Rptr. 2d 686,
692 (Cal. Ct. App. 2001) (the court
“must draw every reasonable inference to
support the award.”)

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